Two Tips to Simplify Retirement Savings for Entrepreneurs
I often see entrepreneurs under-saved for retirement for many reasons.
Cash flow isn’t particularly predictable.
You don’t know how much you’ll make this year, so you don’t know how much to contribute.
Saving for retirement isn’t as straightforward as contributing to your workplace 401(k).
You are generally unfamiliar with the different vehicles that are available to you.
I completely understand those complexities and live them every day! However, the truth is not building wealth outside of your business is so dangerous for your long-term financial health. Here are two tips for you to make saving for retirement more accessible.
1. Put away the funds you want to contribute on a monthly basis. Let’s say you plan to max out your Solo 401(k) contributions ($20,500 for 2022). You will need to contribute $1,708.33/month in order to do so. Set up automated transfers from your business checking account to your Solo 401(k) administrator now and thank me in December when you’re not scrambling to come up with the cash.
2. Put aside a small amount of what you think you will reasonably be eligible to contribute every month. Let’s say you estimate $500 is fair and set up those same automated transfers every month. Any amount above and beyond that you want to contribute should be put into savings.
This means you will have the money stashed away and the flexibility to make the contributions later in the year assuming your business earned as much as you thought it would. Reminder: your business earnings determine how much you can contribute to something like a SEP IRA or profit-sharing contributions to a Solo 401(k).
Oh and don’t forget to actually INVEST the money. Once you move the money into the account, you have to purchase some assets in order to invest it.
Happy wealth building!